African Reserves Loans

Mnangagwa acquires more public debt to finance his second term bid

By Paidamoyo Muzulu

WIN or lose an election is a referendum on the economy by the citizens. More often than not, politicians are aware of this fact and, therefore, sometimes go out of their way, incurring huge debts to make their way to re-election or to extend their term. However, it sometimes leaves their countries in precarious economic positions.

Zimbabwe is gearing up for a decisive general election in 2023, pitting incumbent President Emmerson Mnangagwa against MDC Alliance Nelson Chamisa. Mnangagwa came to power in a coup in November 2017 and then narrowly won the controversial July 2018 ballot.

Zimbabwe was in a serious debt situation. It had started to default on its multilateral international debts totaling $ 7 billion at the time in 2000. This meant that the country had to find new sources of foreign investment at a higher price.

In an effort to avoid a total economic implosion, he turned to China and Russia as part of the so-called Look East policy. The West had long since stopped giving loans to the southern African country in addition to economic sanctions imposed to force the country to democratize.

As the economy was underperforming, Zimbabwe mortgaged its natural resources such as mineral rights to lenders in exchange for new debt. For a while this strategy seemed to have worked but in reality the country is now more in debt than it was before.

Zimbabwe’s debt according to Treasury data is at an unsustainable level of over 70% of its gross domestic product (GDP) and is increasing day by day. It should be noted at this point that the regional grouping, SADC, advises that national / sovereign debt should not exceed 60% of GDP for sustainable economic growth.

It is an established economic solution that when the economy is down, governments stimulate economic growth through quantitative easing, printing money for infrastructure projects that can spur economic growth such as roads. , railways, bridges and airports.

Zimbabwe is no exception, but unfortunately it cannot rely on its printing press as it is still working hard to control the twin challenges of inflation and the galloping exchange rate against the US dollar.

It is therefore based on external debts. And naturally, China with large foreign exchange reserves estimated at over US $ 1 trillion is the country of choice. This is facilitated by China’s Silk Road Belt Initiative.

Mnangagwa ahead of the 2023 general election on October 7, 2021, revealed his ambitious campaign strategy disguised as the State of the Nation (Sona) address and opening of the fourth session of the Ninth Legislature.

Mnangagwa, in his speech of just over 3,000 words, made ambitious promises to the electorate in its various demographics. The promises ranged from accelerated infrastructure development to increasing government-backed agricultural programs.

He further promised pensions, disability claims and income-generating projects for veterans of the liberation struggle and a revised new pension scheme for parliamentarians. The infrastructure programs included the renovation and extension of airports, the dualisation and filling of all national roads and housing estates for civil servants.

On agriculture, Mnangagwa’s government has pledged agricultural mechanization, irrigation equipment and inputs under the controversial Command Agriculture program whose funding is murky.

In 2018, the Auditor General in her audit report noted that US $ 3.2 billion had been used for the program without being affected by Parliament.

Overall, the Mnangagwa administration had used $ 10.2 billion without parliamentary approval and is still seeking an apology through a budget adjustment bill yet to be passed by the legislature.

It is still unclear how the new pledges would be funded until the Treasury tables the 2022 national budget proposals in parliament in November.

However, it is not rocket science that these projects will be financed by loans from China, which so far over the past decade has paid some US $ 3 billion into new power plants in Kariba. and Hwange, the expansion of Robert Mugabe and Victoria Falls international airports, dualisation of roads, modernization of the public mobile telecommunications company NetOne and renovation of the Harare wastewater treatment plant.

Mnangagwa in sa Sona said, “The government has prioritized capital spending, with 34% of total spending to date going to infrastructure development.

“The ongoing phase 2 of the emergency road rehabilitation program is indeed transformational in all provinces, districts, towns and villages. “

Mnangagwa is not the first leader to attempt to extend his tenure with the help of the state’s largesse. Similar stories were experienced in South Africa under Jacob Zuma and in Zambia under Edgar Lungu, respectively.

These ex-leaders were ready to drown their country in debt as long as it guaranteed their stay in power.

Zuma and Lungu have invested in infrastructure projects mainly financed by debt from pension funds or from China.

They have downgraded their country’s credit ratings to junkie status.

Mnangagwa does not seem dissuaded from following in their footsteps as he relentlessly pursues the dream of creating an upper middle class economy for Zimbabwe by 2030. The biggest question for the opposition and civil society is whether how to hold the Mnangagwa administration responsible for the debt contraction? Do they think Zimbabwe’s debt crisis can be resolved within the next decade?

As Zimbabwe’s parliament prepares to debate Mnangagwa’s speech in the coming weeks, it is important that lawmakers keep the issue of debt and democracy in mind.

The issue that unsustainable debt is a threat to democracy and socio-economic development like austerity would certainly be implemented with many casualties.

For now, with Mnangagwa’s party enjoying a two-thirds majority in parliament, it seems highly unlikely that the Legislative Chamber will stop him in its tracks. It is therefore incumbent on the opposition, unions and civil society to use political and legal measures to prevent Mnangagwa from further indebting Zimbabwe to China.

Without a concerted effort from the aforementioned groups, Zimbabwe will find itself in a debt trap for the next three years where it cannot get out.

Mnangagwa should be prevented from increasing Zimbabwe’s sovereign debt in exchange for extending his tenure.

  • Paidamoyo Muzulu is a Harare-based journalist. He writes here in his personal capacity.

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